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Tectonic-like shifts have rocked the media industry over the past year.
Declining markets mutilated traditional media stables, especially in the United States, where the already momentous decline of print media was accelerated in the wake of the world’s recent economic explosion.
That led to oblivion for many print media brands and big changes for many more.
The South African industry wasn’t left unscathed and our media houses continue to feel the pinch as they lag behind the US market in experiencing the fallout of recession.
Magazines and newspapers continue to close their doors or leave for online pastures.
The major hits experienced in developed markets have been cushioned by a different set of dynamics in developing markets, where internet penetration and other factors limit the erosion of traditional forms of media.
However, we learned last year that the cushioning was marginal and the local industry – especially in catering to the upper end of the market – faces similar challenges to its First World counterparts.
Adapt or die
It hasn’t been an easy adaption for traditional media, but for shrewd media companies that pre-empted the bad weather it hasn’t been the worst of times.
Industry giant Naspers has come out shining, with strong online assets and diversification of its television operations that have unlocked growth even in the face of economic turmoil and declining advertising revenues that impacted its print media divisions.
Media group Avusa has also come through strongly, despite declines in its publishing operations.
And Kagiso maintained stable margins for its broadcasting division while enjoying growth in its digital assets.
But Caxton was hard hit by declining ad revenues and other market effects on print media.
The bigger picture for listed media entities with diversified interests in SA has been positive, with declines in the older side of the businesses (as was to be expected) and healthy growth from units that work online or in contemporary broadcasting.
Avusa started off 2009 on a low, with restructuring operations under way that promised to promote efficiency and improve operations.
The results of that proved to be positive when Avusa reported its results in June.
The group gained 8% in revenue from continuing operations to R4.8bn for the year ending March 2009, with profit for the year at R329m, exceeding its previous year by 58%.
The sale of Avusa’s Nigerian and Kenyan interests curbed operational losses and added a R62m profit on sale.
Restructuring... retrenchments
Retrenchments formed part of the restructuring efforts at Avusa and incurred costs of R25m.
The group also pumped R6m into the development of new digital and multi-media projects.
When Avusa reports its next set of results for the year to end-March 2010 we expect to see a vast improvement in its Nu Metro assets during the year.
In 2008/2009 Avusa introduced new operations under the Nu Metro brand to provide niche entertainment content.
While growing its operations on the one hand, Nu Metro also shed off operations that weren’t performing, closing down cinemas that had laboured the company.
Nu Metro also geared up for the trend to 3-D films and kitted out its cinemas with high quality digital projectors to that end.
That prepared it for the tide of 3-D titles in 2009 and 2010.
In the 3-D stakes, Nu Metro was better prepared than its rival Ster-Kinekor, a subsidiary of the unlisted Primedia group.
Publishing saw continued pressure as international markets for print continued to decline and with them the relevant operations within Avusa.
The same was true for Naspers, but any gloom from print operations was severely displaced by massive gains from pay-TV and internet operations.
Internet impressive
Naspers’ results for the six months ending September 2009 showed its Internet and pay-TV divisions posted strong returns.
The diversification of pay-TV operator MultiChoice’s DStv service to include bouquets for lower-income subscribers had contributed to a 15% boost in revenues for the business to R8bn over the half-year period.
Interestingly, DStv also benefited from the downturn and an economic climate in which South Africans opted for home entertainment instead of leaving the house for family outings and holidays.
That nesting dynamic was good for TV and other home entertainment, such as video games.
MultiChoice’s moves in diversifying its pay-TV offering also prepared it for the arrival of potential competitors Super 5 Media and On Digital Media (ODM), which are yet to begin broadcasting.
On Digital has revealed some of its plans to commence offering services in June this year.
It says it doesn’t plan to attack DStv’s market as such but sees itself appealing to a second pay-TV window in the SA for subscribers who can’t afford DStv.
ODM’s research has revealed a TV market in SA of 10.5m potential customers – 2m of those being DStv subscribers and it foresees capturing a healthy portion of the remaining 8m.
ODM’s investors include First National Media Investment Holdings (28%), Cosatu’s investment arm, Kopano Ke Matla (20%), SES Astra (20%), the Industrial Development Corporation (10%), National Empowerment Fund (10%), First A1 Investments (10%) and former MultiChoice executive Mervin Moodley (1%).
Healthy competition
ODM has deep pockets and healthy prospects, but as it’s not competing directly with DStv, Naspers’ investors shouldn’t expect to see a dent in the ongoing growth of MultiChoice.
If anything, ODM will supplement MultiChoice’s earnings by buying content from it.
Online divisions within Naspers performed well in 2009 and in the six month period mentioned above, posting 29% revenue growth to R4bn.
Most of that’s attributable to Chinese internet company Tencent, in which Naspers has a 35% interest.
The group [Naspers] has also picked up additional investments in eastern European and Asian markets that are showing healthy growth.
Broadcasting in general looked good in 2009, with Kagiso reporting operating profit margin for its broadcasting division at 50% for the year to end-June 2009.
Kagiso’s intention to increase revenue from new applications led to the establishment of a new division called Kagiso Media Convergence.
It’s designed to supplement existing assets and to act as an incubator for the group’s new media capabilities.
The revenue attributable to the fledgling division grew to almost R15m from just R3m in 2008.
But declines in media spend from agencies did hit Kagiso, leading to only a marginal increase in operating profit to R25.9m.
With advertising under pressure, radio stations raised their rates.
RadMark, the Kagiso company responsible for advertising sales throughout the group’s stable of stations, increased its rates by an average 11%.
Jacaranda 94.2, East Coast Radio and Heart 104.9 upped their rates by 9%, while Gagasi and Kaya FM increased theirs by 14% and 15% respectively.
TV ops doing well
Kagiso also reported solid results from its Gloo Digital acquisition and in its TV studio operations.
The decline in advertising and generally in print media was made apparent in Caxton’s results to end-June 2009, which saw profits halved.
Results for the following six months to year-end December weren’t much better: profits stayed low and turnover decreased slightly.
Caxton said while profits were down on the corresponding period, the prevailing economic circumstances made it a creditable achievement they were only marginally lower.
Caxton’s position remains strong in terms of cash and equivalents but it’s questionable whether the pressure on print publishing and declining ad revenues will show a turnaround any time soon.
Small is sexy?
The bell is tolling for print behemoths.
Companies such as Naspers and Avusa owe their growth to digital and entertainment assets and the astute decisions of their managements that saw the coming winds of change and made the necessary moves before the pawpaw hit the fan.
Currently, advertising revenues have reportedly started to improve, but print faces ongoing challenges from market changes that make selling magazines and newspapers more difficult than ever.
That’s expected to continue as online entities grow and displace other forms of media this year, relying on volumes to emulate the kind of revenues experienced from traditional media.
In SA – where broadband continues to lag severely behind the developed world, both in penetration and availability – print is likely to remain the only form of media impacted by the online migration, while TV and radio face pressure in markets such as the US, where IP television and other forms of new media broadcasting are beginning to pick up in both popularity and profitability.
Media companies have no option but to adapt if they’re to maintain relevance in the market and their ability to do so will underpin performance over the coming year.
- Finweek
Declining markets mutilated traditional media stables, especially in the United States, where the already momentous decline of print media was accelerated in the wake of the world’s recent economic explosion.
That led to oblivion for many print media brands and big changes for many more.
The South African industry wasn’t left unscathed and our media houses continue to feel the pinch as they lag behind the US market in experiencing the fallout of recession.
Magazines and newspapers continue to close their doors or leave for online pastures.
The major hits experienced in developed markets have been cushioned by a different set of dynamics in developing markets, where internet penetration and other factors limit the erosion of traditional forms of media.
However, we learned last year that the cushioning was marginal and the local industry – especially in catering to the upper end of the market – faces similar challenges to its First World counterparts.
Adapt or die
It hasn’t been an easy adaption for traditional media, but for shrewd media companies that pre-empted the bad weather it hasn’t been the worst of times.
Industry giant Naspers has come out shining, with strong online assets and diversification of its television operations that have unlocked growth even in the face of economic turmoil and declining advertising revenues that impacted its print media divisions.
Media group Avusa has also come through strongly, despite declines in its publishing operations.
And Kagiso maintained stable margins for its broadcasting division while enjoying growth in its digital assets.
But Caxton was hard hit by declining ad revenues and other market effects on print media.
The bigger picture for listed media entities with diversified interests in SA has been positive, with declines in the older side of the businesses (as was to be expected) and healthy growth from units that work online or in contemporary broadcasting.
Avusa started off 2009 on a low, with restructuring operations under way that promised to promote efficiency and improve operations.
The results of that proved to be positive when Avusa reported its results in June.
The group gained 8% in revenue from continuing operations to R4.8bn for the year ending March 2009, with profit for the year at R329m, exceeding its previous year by 58%.
The sale of Avusa’s Nigerian and Kenyan interests curbed operational losses and added a R62m profit on sale.
Restructuring... retrenchments
Retrenchments formed part of the restructuring efforts at Avusa and incurred costs of R25m.
The group also pumped R6m into the development of new digital and multi-media projects.
When Avusa reports its next set of results for the year to end-March 2010 we expect to see a vast improvement in its Nu Metro assets during the year.
In 2008/2009 Avusa introduced new operations under the Nu Metro brand to provide niche entertainment content.
While growing its operations on the one hand, Nu Metro also shed off operations that weren’t performing, closing down cinemas that had laboured the company.
Nu Metro also geared up for the trend to 3-D films and kitted out its cinemas with high quality digital projectors to that end.
That prepared it for the tide of 3-D titles in 2009 and 2010.
In the 3-D stakes, Nu Metro was better prepared than its rival Ster-Kinekor, a subsidiary of the unlisted Primedia group.
Publishing saw continued pressure as international markets for print continued to decline and with them the relevant operations within Avusa.
The same was true for Naspers, but any gloom from print operations was severely displaced by massive gains from pay-TV and internet operations.
Internet impressive
Naspers’ results for the six months ending September 2009 showed its Internet and pay-TV divisions posted strong returns.
The diversification of pay-TV operator MultiChoice’s DStv service to include bouquets for lower-income subscribers had contributed to a 15% boost in revenues for the business to R8bn over the half-year period.
Interestingly, DStv also benefited from the downturn and an economic climate in which South Africans opted for home entertainment instead of leaving the house for family outings and holidays.
That nesting dynamic was good for TV and other home entertainment, such as video games.
MultiChoice’s moves in diversifying its pay-TV offering also prepared it for the arrival of potential competitors Super 5 Media and On Digital Media (ODM), which are yet to begin broadcasting.
On Digital has revealed some of its plans to commence offering services in June this year.
It says it doesn’t plan to attack DStv’s market as such but sees itself appealing to a second pay-TV window in the SA for subscribers who can’t afford DStv.
ODM’s research has revealed a TV market in SA of 10.5m potential customers – 2m of those being DStv subscribers and it foresees capturing a healthy portion of the remaining 8m.
ODM’s investors include First National Media Investment Holdings (28%), Cosatu’s investment arm, Kopano Ke Matla (20%), SES Astra (20%), the Industrial Development Corporation (10%), National Empowerment Fund (10%), First A1 Investments (10%) and former MultiChoice executive Mervin Moodley (1%).
Healthy competition
ODM has deep pockets and healthy prospects, but as it’s not competing directly with DStv, Naspers’ investors shouldn’t expect to see a dent in the ongoing growth of MultiChoice.
If anything, ODM will supplement MultiChoice’s earnings by buying content from it.
Online divisions within Naspers performed well in 2009 and in the six month period mentioned above, posting 29% revenue growth to R4bn.
Most of that’s attributable to Chinese internet company Tencent, in which Naspers has a 35% interest.
The group [Naspers] has also picked up additional investments in eastern European and Asian markets that are showing healthy growth.
Broadcasting in general looked good in 2009, with Kagiso reporting operating profit margin for its broadcasting division at 50% for the year to end-June 2009.
Kagiso’s intention to increase revenue from new applications led to the establishment of a new division called Kagiso Media Convergence.
It’s designed to supplement existing assets and to act as an incubator for the group’s new media capabilities.
The revenue attributable to the fledgling division grew to almost R15m from just R3m in 2008.
But declines in media spend from agencies did hit Kagiso, leading to only a marginal increase in operating profit to R25.9m.
With advertising under pressure, radio stations raised their rates.
RadMark, the Kagiso company responsible for advertising sales throughout the group’s stable of stations, increased its rates by an average 11%.
Jacaranda 94.2, East Coast Radio and Heart 104.9 upped their rates by 9%, while Gagasi and Kaya FM increased theirs by 14% and 15% respectively.
TV ops doing well
Kagiso also reported solid results from its Gloo Digital acquisition and in its TV studio operations.
The decline in advertising and generally in print media was made apparent in Caxton’s results to end-June 2009, which saw profits halved.
Results for the following six months to year-end December weren’t much better: profits stayed low and turnover decreased slightly.
Caxton said while profits were down on the corresponding period, the prevailing economic circumstances made it a creditable achievement they were only marginally lower.
Caxton’s position remains strong in terms of cash and equivalents but it’s questionable whether the pressure on print publishing and declining ad revenues will show a turnaround any time soon.
Small is sexy?
The bell is tolling for print behemoths.
Companies such as Naspers and Avusa owe their growth to digital and entertainment assets and the astute decisions of their managements that saw the coming winds of change and made the necessary moves before the pawpaw hit the fan.
Currently, advertising revenues have reportedly started to improve, but print faces ongoing challenges from market changes that make selling magazines and newspapers more difficult than ever.
That’s expected to continue as online entities grow and displace other forms of media this year, relying on volumes to emulate the kind of revenues experienced from traditional media.
In SA – where broadband continues to lag severely behind the developed world, both in penetration and availability – print is likely to remain the only form of media impacted by the online migration, while TV and radio face pressure in markets such as the US, where IP television and other forms of new media broadcasting are beginning to pick up in both popularity and profitability.
Media companies have no option but to adapt if they’re to maintain relevance in the market and their ability to do so will underpin performance over the coming year.
- Finweek
